Emily Jo Cureton, The Triplicate

'Regionalization' at Sutter Coast must wait for arbitration efforts

Contentious decisions about the future of Del Norte County's only hospital won't be made until a dispute is resolved between the private corporation that operates it and the public entity that used to, according to a long-awaited judgment from Del Norte County's Superior Court on Wednesday.

Visiting Judge Leonard LaCasse ruled to keep in place a hospital Board of Directors comprised mostly of area residents, keeping alive the county Health Care District's case against Sutter Health and Sutter Coast Hospital.

LaCasse's decision also stays Sutter Health from applying for Critical Access Hospital designation, a federal program that some fear would follow if the hospital is "regionalized" and a non-local Board of Directors is in charge. The designation would shrink medical services in order to guarantee cost-based reimbursement for Medicare patients.

"I want it carefully limited," the judge stipulated of the to-be-drafted order, "I want Sutter to be able to do feasibility studies, anticipatory work ... I'm only here to preserve the status quo until there's a final determination."

While the district got what it was seeking, so in part did Sutter Health. A motion to have the case moved out of the court system and into arbitration prevailed, meaning that what the judge described as "a matter of immense public concern" will proceed with representatives of the two sides behind closed doors in Sacramento, to be mediated by the American Arbitration Association.

More than 40 people packed the courtroom Wednesday, mostly seniors who've rallied against regionalization at the urging of local doctors. Hospital governance and what it means for patients has been extensively argued in the court of public opinion over the last year: at two protests in front of the hospital, town hall meetings, in local government's chambers and in scores of letters to the editor.

LaCasse opened the formal hearing by describing the court's limited power in settling the dispute, which raises big questions about the impact of hospital chain consolidation, nationwide and particularly in Northern California, where Sutter Health's dominant market share and high consumer prices are currently the subject of an anti-trust investigation by the state Attorney General's Office.

"I want to be sure the public at large understands that this court doesn't get to vote on policy issues ... I understand the big picture, the problems with regionalization and the economic impacts," he said, adding: "I'm one judge. I'm not making policy for medical services delivery."

Arguments from both sides focused on the staying power of a single document: a 26-year-old lease agreement between Sutter Health and the Health Care District, which signed over a publicly owned hospital and promised a new facility, (built in 1992), to be governed by a majority of local residents.

Representing Sutter Health and Sutter Coast Hospital was Michael Duncheon and Michael McNaughton, who contended that this contract "expired by its own terms 20 years ago."

Health Care District attorney Michael Morrison argued that because both parties continued to abide by the lease's terms without contesting them, that is "strong circumstantial evidence that those agreements were intended to survive."

"I have great difficulty with the idea that there's a solid contract with both feet on the ground, but then again I've been persuaded this morning that there's some likelihood the plaintiffs will prevail," said LaCasse, citing the notion of an "implied duty" of Sutter Health to maintain and operate an acute care facility in Del Norte County.

"The question is: Do they have to do that forever? And that's a question I don't have to answer," he concluded.

Q-and-A exchanges between the judge and the attorneys peppered the 90-minute hearing.

At one point McNaughton was saying: 'They are trying to dictate to private companies ..." when he was cut off.

"Private company, private company. Aren't you a public benefit corporation?" LaCasse interrupted, alluding to Sutter Health's tax status and its corresponding obligations.

"This is not General Motors. This is Sutter Medical. They deliver medical services to people, including people who can't pay for them, under federal law ...It's sort of become a public utility in that sense. The argument that this is a private company is not persuasive in this case," the judge said.

After the hearing, Dr Kevin Caldwell commented:

"We are happy to get this preliminary injunction. I think arbitration in this case was not what we wanted, but it was what the original contract said. Since we've established now that the original contract is in effect, we have to follow it."

Caldwell is a local physician, Health Care District representative and a former hospital board member who cast the sole vote against pursuing regionalization last November.

Hospital spokesperson Beth Liles commented by email Wednesday afternoon:

"We are disappointed with the ruling. Sutter Coast Hospital and Sutter Health continue to believe the District's claims are without merit as they are based on a 1985 lease that expired by its own terms when Sutter Health built and opened the new hospital. We of course will abide by the terms of the preliminary injunction until the matter is resolved in arbitration."

While an initial temporary restraining order in this case barred Sutter Health from downsizing or reorganizing any departments at the hospital, particularly billing, this provision was not included in Wednesday's ruling.

Hospital officials have said that the "consolidation of support services" is already happening independently of regionalization. Last week Sutter Health announced the opening of a 1,000-employee center for administration in Roseville, which will ultimately reduce the number of employees at its 27 affiliated hospitals. The specific impact on Crescent City's staffing hasn't been announced.

Reach Emily Jo Cureton at ecureton@triplicate.com.